Pensions Bulletin 2026/11

LCP urges Ministers to beware of unwise interventions in domestic pension fund investment drive 

LCP has published a report, alongside economics consultancy Frontier Economics, analysing the Government’s policies that may either force pension schemes to invest in particular ways (mandation), or create new incentives to change investment patterns using billions of pounds of public money (through potential partnerships with publicly funded organisations such as the British Business Bank etc). 

The report finds that: 

• Big differences in investment strategies between the UK and other countries’ pension schemes, for example, Australia, are driven more by the much greater scale of these schemes compared with the UK, rather than by a general unwillingness by UK schemes to invest locally.  
• As UK schemes grow, they will, in any case, tend to diversify, investing more in the sort of assets that the Government wishes to promote, without needing to be forced to do so. Some larger UK schemes already have significant allocations to private markets and infrastructure, and more are set to follow as they grow. 
• Just because pension schemes in other countries allocate a certain percentage to domestic ‘productive’ assets, it does not follow that this is the right answer for UK schemes. Instead, policy should identify ‘market failures’, ie those markets where the socially optimal level of investment is not delivered. 

The report considers the potential barriers to investment in UK productive finance and how these barriers might be addressed through scale and existing Government interventions. The authors conclude that the potential move from voluntary to mandatory investment strategies is not supported, and the Government’s actions need to be subject to rigorous evaluation to ensure that they are not distorting the investment market or creating “unwelcome deadweight costs” for the taxpayer (because of the public costs of organisations such as the British Business Bank etc).  

The timing of the report’s comments on this topic is particularly relevant given that it has been reported that the Pensions Minister, Torsten Bell MP, said at the Pensions UK Investment Conference on 11 March 2026 that the mandation legislation will be further clarified. It is not yet clear what the Minister intends but these reported comments from the Minister follow strong calls from various parts of the industry such as Pensions UK and the Pensions Management Institute and the Society of Pension Professionals for this to be revisited, which were also supported by an ABI survey showing widespread concern over government involvement in pension investment. 

The new LCP report has already been welcomed by some parts of the industry, such as the Pensions Management Institute and LCP and Frontier Economics are hosting a webinar to discuss the joint paper with speakers including Sir Steve Webb (former Pensions Minister) and Paul Johnson (former Director of the Institute for Fiscal Studies). 

Meanwhile, in a potential sign that the Government’s mandation power may run into trouble in the House of Lords, on 16 March 2026, the Government was defeated on an aspect of the proposed operation of the Local Government Pension Scheme (LGPS), set out in the Pension Schemes Bill, with peers voting to limit the scope of the asset pool companies’ provisions so that regulations could not tell the LGPS to invest in particular assets, asset classes or locations of investment. 

Lords make more changes to the pension salary sacrifice Bill – but will the Government agree? 

The National Insurance Contributions (Employer Pension Contributions) Bill has returned to the House of Commons for it to consider all the amendments made by the House of Lords, none of which were tabled or supported by the Government. This is due to take place on 23 March 2026 and assuming that one or more of the Lords’ amendments are rejected, the Bill will enter the ping-pong phase which could potentially go on for a while. 

In addition to the student loan point on which we reported last week (see Pensions Bulletin 2026/10), the Lords most notably increased the £2,000 pa cap to £5,000 pa. It also exempted completely from the new NIC charge small or medium-sized employers and those operating in the charity or social enterprise sector. Finally, the Lords expedited the Parliamentary process in respect of any regulations that increased the cap. 

Finance Bill nears completion 

All the remaining stages of the Finance Bill were completed in the House of Lords on 17 March 2026, with the Bill now in final form and awaiting Royal Assent, which is scheduled for 18 March 2026. 

The numerous Government changes to the new IHT on pensions law, tabled for House of Commons Report stage, and on which we have reported (see Pensions Bulletin 2026/10) were taken into the Bill before it left the Commons, as was the lifetime allowance abolition regulation-making power on which we also reported at the same time (see Pensions Bulletin 2026/10). With no further pensions amendments made, the soon to be Act now contains the following aspects of interest to pension provision: 

• Clause 59 – Abolition of the lifetime allowance charge: regulation-making powers  
• Clause 60 – Collective money purchase schemes: registration and related matters 
• Clauses 66-71 – Inheritance tax on unused pension funds and death benefits 

The new tax adviser requirements on which we have previously reported (see Pensions Bulletin 2025/50), are now set out in Clauses 223-253 and Schedules 20-22 of the Bill.  

TPR urges vigilance after rise in impersonation fraud 

The Pensions Regulator (TPR) has issued a new scam alert to the pensions industry, in collaboration with the City of London Police, warning that fraudsters are posing as pension savers to gain access to their retirement pots. This alert renews TPR’s initial impersonation fraud alert issued in September 2025 (see Pensions Bulletin 2025/37).  

Specifically, there has been a sharp rise in reports of impersonation fraud affecting UK pension scheme members residing in Africa in 2025. This follows a year-on-year rise since 2016. 

However, TPR warns that the risk is not just limited to Africa and urges trustees and administrators to:  

• review their identity and verification check procedures to ensure they remain robust 
• review data security for letters and documents that are posted to overseas addresses 
• encourage members to strengthen online security by adopting two-step verification and using stronger passwords 
• signpost members to resources such as Stop! Think Fraud. 
• tell Report Fraud about any suspected fraud immediately. You don't have to be certain to report. 

DC Landscape report illustrates continued trend of consolidation 

The Pensions Regulator’s (TPR) 2025 occupational defined contribution landscape report shows the trend of smaller DC schemes exiting the market continues at pace with TPR stating that the number of non-micro DC and hybrid schemes (ie those with 12 or more DC members) decreased by 15% over the last year, from 920 schemes in 2024 to 790 schemes in 2025. This follows TPR reporting a 15% decrease in 2024 (see Pensions Bulletin 2025/09) on top of an 11% decrease in 2023 (see Pensions Bulletin 2024/20). This reduction in schemes has been greatest in the segment of non-micro schemes with fewer than 5,000 memberships. 

Despite this reduction in the number of schemes, total memberships have increased again, this year by 7% from 30.6m memberships to 32.8m and DC non-micro scheme assets have grown by 22%, up from £205bn to £249bn; master trusts dominate these numbers with 30.1m memberships (92%) and £208bn in assets (83%). 

In the accompanying press release, TPR has repeated a very similar message from last year that it believes “larger schemes are better placed to deliver value for money, including stronger investment returns and better service” and that trustees of smaller schemes “that cannot match the stronger performers should consolidate out of the market and transfer savers to a better value scheme.”